The 2015 Canadian Federal Budget

Joe Oliver and the government have prepared the 2015 Budget, and a number of proposals will impact the financial, tax and estate plans of Canadians. The following is a summary of a few of the proposals:

Federal Tax Rates

There were no changes to the personal federal income tax rates or income brackets for the 2015 year.

Tax Free Savings Accounts (TFSA)

This is power proposal that will greatly affect individuals’ ability to save for retirement.  The 2015 Budget proposes to increase the annual contribution limit to $10,000 for 2015 and subsequent years.  The indexing of the TFSA that was used in the past will no longer be applicable.  However, the $10,000 a year contribution is a generous increase and the indexing is probably not needed.  If you have never contributed to a TFSA and were 18 years of age in 2009 (the year TFSA’s were introduced and assuming you meet the eligibility requirements) you should have $41,000 of contribution room.  Many types of investments can be held in the TFSA; so it is not just a savings account and should be called a tax free investment account.

There is no tax deduction when you contribute to the TFSA; however, the funds that are removed from the TFSA are not taxable.  This benefit will help seniors reduce the OAS clawback.  The investment income earned inside the TFSA is not taxable as well.  The TFSA was introduced in 2009 and started with a $5,000 a year annual contribution limit.  In 2013 the annual contribution limit was increased to $5,500.   It has now grown to be a serious weapon in your retirement arsenal that needs to be utilized.

Minimum RRIF Withdrawals

One of the options for individuals that own a Registered Retirement Savings Plan (RRSP) and have reached the age of 71 during the year, is to convert the RRSP  to a Registered Retirement Income Fund (RRIF).  One of the differences between the RRSP and RRIF is that the RRIF requires a minimum withdrawal amount.  Once the RRIF annuitant reaches the age of 94, the withdrawal rate will be capped at 20%.

The 2015 Budget proposes to reduce the minimum withdrawal amount for individuals that are between the ages of 71 and 94.  The current minimum withdrawal rate is approximately 7% at age 71.  The new withdrawal rate at age 71 is slightly over 5%.  So, this is approximately a 2% reduction; a welcome change that will allow retirees to maintain their savings in a tax sheltered plan of a RRIF for a longer period.

A key pointis that if the retiree has made withdrawals based on the old rules, you can re-contribute the over-withdrawals and claim a deduction on your 2015 tax return.

Make sure you keep pace with all the Budget changes that will affect your wealth management. At GTA Wealth Management Inc., we can help. We have financial planners and accountants who will provide you with the assistance you need to manage your financial planning.

Contact or call GTA Wealth Management toll free 1 855 GTA WLTH (855 482 9584) to accelerate your ride to financial independence. A professional wealth management financial advisor is ready to serve your wealth management, tax return and planning needs. GTA Wealth Management Inc. has three convenient locations in Mississauga, Toronto and Markham to serve you.

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